Hettrick: Hi-Def Discs Already Double Size of Download Market

[Jeff®]

January 17, 2008
Hi-Def Discs Already Double Size of Download Market


by: Scott Hettrick

Consumers spent more than $260 million on hi-def discs in 2007, according to my math based on the $170 million that Fox's Danny Kaye said during CES was spent on Blu-ray Disc software, which accounted for about 65% of all sales.

That does not count revenue from hardware sales (roughly anywhere from another $500 million to $1.5 billion, depending on how you count videogame players with hi-def disc capability).

Meanwhile, consumers spent less than half of hi-def disc software sales alone on Internet downloads in 2007 -- $123 million, according to Adams Media Research.

I mention that only to provide perspective.

Internet downloads and Web-delivered content are the hot topic these days.

As a consumer, I have no problem with that. In fact, I relish it.
The more ways and the more control we have in accessing and viewing movies the better. I love watching videos on the Web. The more companies, web sites, distributors involved, the better. The more portability the better.

I was pleased to see Apple's announcement this week that every studio is partnering with them in various iTunes initiatives. Hey, there are 24 million video iPods out there and tons more portable video devices so let's get as much product to them as possible.

And I like Fox's Digital Copy for iTunes strategy. (BTW, that plan requires that you start with a movie that has been purchased on a disc that can then be transferred free to your iTunes library -- a digital copy, not a VOD digital download.)

But as exciting as all these new technologies are, and as cool as the new gadgets can be, it's important, especially for market watchers and analysts, not to lose sight of where consumers are spending most of their money, where they will continue to spend most of their money for the foreseeable future, and where studio profits will continue to come from for many years.

Analysts and some bloggers often have a hard time with the concept of peaceful co-existence and strong revenue from multiple formats simultaneously. There seems to be the notion that only one format can be successful, that whatever is the hot new technology, every other technology must be projected to be obsolete or on the verge of death, regardless of the reality of where consumers are spending their money.

In fact, the beauty of all these new technologies is that they are wondeful additional ways to enjoy movies and TV shows but they do not negate or replace my primary desire of watching a movie, when possible, in full 1080p hi-def on my 42-inch and 65-inch plasma displays with surround sound.

By the way, I consider Blu-ray Disc to be one of the most exciting of the cool new technologies. For the first time I am seeing movies in stunning 1080p hi-def and uncompressed audio; for the first I can access the menu for scenes and bonus features without leaving the movie; for the first time I can access the Internet for additional trailers, blogs, commentaries and interactivities.

Meanwhile, I love also having the option of being able to find any movie I want easily on the Internet and quickly and easily downloading it to a portable device that I can then take with me to wherever I may have time to kill or might want to enjoy watching it outside of my home theater environment.

But that doesn't replace my desire to enjoy all the bonus features and interactivities offered on discs when I can do so.

Sure, I can start watching a hi-def movie download within seconds or just a couple minutes after clicking to do so, but it will still take a couple hours to have the whole thing downloaded.

When it does finish downloading, it is compressed and not in full 1080p and does not have uncompressed audio.

It takes up a ton of storage space.

It doesn't have the packaging -- at least not that I can touch and feel without making a printout.

It doesn't have chapter stops.

It doesn't have audio commentaries, making-of documentaries, bloopers, deleted scenes, trailers, etc.

It doesn't have interactivities.

It doesn't allow me to lend it to a friend or play it on more than a finite number of players.

And the reality is that far more homes have disc players (more than 90 million, according to DEG: The Digital Entertainment Group) than have high-speed Internet access. Adams says the number of homes in the U.S. with high-speed has grown to 61 million, about 53% of U.S. households and 74% of homes with PCs. Nonetheless, that's a very strong percentage. Adams projects that number to continue to grow and, with it, the revenue spent on digital downloads, which he shows eventually outpacing cable/satellite pay-per-view/video-on-demand. But that will take five years and will only then be overtaking a market that has taken decades to even reach the $1 billion mark.

Meanwhile, Adams reports that hi-def discs -- already at $260 million in the first full year despite being bogged down by a large-scale format war -- will provide a big spark for growth in the overall disc market, which already stands at a whopping $24 billion.

Sounds like there are a lot of formats and technologies to be bull-ish about -- not just one.

http://www.hollywoodinhidef.com/blog_detail.php?id=164

[Joe Cain]

Scott Hettrick and Dan Ramer are two people I very much enjoy reading these days.

[seto]

That was a nice read. Thank you for the post. ^^b

[tiger roach]

Good article.